In this specification reference is made to a ‘Bill of Materials’ (BOM). A BOM may relate to the supply of goods and/or services, and for ease of reference these are generically referred to in this specification as materials. The BOM in this case is defined as the material purchase requirement, and includes the list of material items that the buyer will procure, as well as business rules, market rules, and any additional comments. A common term that may be used interchangeably with BOM in this context is ‘Lot’.
Traditionally, a buyer of materials will prepare a ‘Request For Quotation’ (RFQ) and send this to a number of potential suppliers. The RFQ is used to acquire information and pricing about strategic goods and services. An RFQ may set out not only the specification of the materials required but other details of the buyers requirements, such as supply period, payment terms, return rules, liabilities for defects, indemnities against loss, etc. In reality, offers for the supply of materials received commonly have terms of supply which vary from the stipulations of the RFQ. For example, a particular supplier may be the one to offer the lowest price for the materials, but may not accept the supply term or liabilities set out in the RFQ. For materials supply critical to the buyer, this means that considerable time and effort in direct face-to-face negotiation with a number of suppliers is needed before a final contract for supply can be realised. This is the process of awarding a tender, which process includes reviewing submissions to the RFQ, selecting a winning tenderer, and finally contract negotiations to determine the final terms of trade.
In an effort to simplify the process, it has become common for buyers to approach a number of known suppliers for a certain category of goods or services in order to establish a panel of suppliers. Suppliers are often willing to participate in a selection process for appointment to a panel where the buyer constitutes a significant on-going purchaser of these types of materials. To be appointed to the panel, each supplier enters into a standard contract which specifies the general terms of supply of materials from that supplier to the buyer. Such contracts are referred herein as base supply contracts and deal with issues such as payment terms, return rules, liabilities for defects, indemnities against loss, etc, as mentioned previously. This means that when the buyer wishes to buy certain materials, only the panel of suppliers are approached and the RFQ is significantly simplified, as is any consequent offer for the supply of those materials.
The use of base supply contracts is now prevalent in not only the manufacturing industry but also the service industry.
Notwithstanding this, considerable manual effort is still needed to coordinate the selection of a supplier.